Terrorism, Organized Crime, Money Laundering

BERLIN— The connection between terrorism and organized crime is irrefutable. Estimates of the total money laundered around the world range from $500 billion to $1.5 trillion, most of it from the illegal drugs trade — and around 70 percent of the world's opium comes from Afghanistan.

The inseparability of corruption and terrorism was highlighted earlier this month by the secretary-general of Interpol, Ronald Noble. "If corrupt public servants provide false identity documents," he said, "terrorists will move more freely throughout the world, and all of us will remain threatened."

The facilitators of money laundering can be lawyers, accountants, real estate agents or investment advisers. Along with banks and their customers, they should be subject to laws against money laundering.

As a measure of the international priority that the issue is now given, the OECD-based Financial Action Task Force on Money Laundering is holding a special meeting in Washington this Monday and Tuesday to consider measures to stop the flow of terrorist funds.

The meeting is a timely opportunity to make urgent revisions to the task force's recommendations on money laundering so as to cover all serious crimes, including corruption and terrorism. All major financial centers should then follow up by translating the recommendations into national laws and binding bank regulations.

Barely six months ago there was concern that the Bush administration was set on a unilateralist course. As well as considering withdrawing from the OECD working group on tax havens, it was concerned by the escalating costs of scrutinizing the movement of relatively small amounts of money.

Since Sept. 11, few would dispute either that it is worth paying such costs or the imperative of effective national procedures for following up "suspicious transaction reports."

Although improvements are being proposed, in almost all countries the current responsibilities of financial service companies, supervisors, government departments and law enforcement agencies are less than clear.

The 19 states identified by the task force as lax on money laundering include Egypt, Israel, Lebanon, Indonesia and Russia. There are no regulations against money laundering in Afghanistan, Iran and Iraq, and arrangements are inadequate in Saudi Arabia and Pakistan. Middle East-based terrorists clearly encounter little difficulty in the search for banking facilities.

An international coalition is emerging around the need to cut off the avenues available to corrupt elites for diverting ill-gotten gains into foreign bank accounts. As the Global Corruption Report, published this month by Transparency International, states(see www.globalcorruptionreport.org): "Unfortunately, laundering only needs to be good enough to defeat the capacity of financial investigation skills and the burden of proof in any of the jurisdictions along its economic path."

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Transparency International has consistently argued for multilateral action to increase the pressure on poorly regulated countries, and for extension of the Wolfsberg "know your customer" Anti-Money-Laundering Principles, signed a year ago by 11 private banks.

Improved international coordination is pivotal to successful recovery of stolen assets, as is coverage of corruption as well as terrorism in new legislation and regulations, even if the only way to enforce these steps is through sanctions against uncooperative offshore financial centers.

This means in effect cutting countries without adequate provisions against money laundering out of the financial system. Until all weak entry points in the financial services industry are closed, it will remain possible for the corrupt to launder their stolen wealth.

At the governmental level, many countries have to make key legislative changes. For instance, EU countries can act only through bilateral agreements in matters concerning assetsheld in another member state. In Italy, the government actually approved a law on Oct. 3 making it more difficult to investigate suspicious flows of money across borders.

International arrangements against money laundering are critical, even more so with the imminent launch of the euro, when a smooth transition should not come at the price of lax regulations allowing underworld money to slip through the regulators' net.

More effective multilateral arrangements, including information-sharing regimes, need to be put in place as soon as possible. All money laundering is cross-border, so international efforts are essential to identification and pursuit.

If corrupt ruling elites and other undesirable persons know that their funds are unwelcome or likely to be frozen, fewer countries will become fertile breeding grounds for corruption and terrorism.

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The writer is executive director of Transparency International, a nongovernmental organization fighting corruption. He contributed this comment to the International Herald Tribune.